Nigeria issues regulations against frivolous request for electricity tariff hike

Generation companies demand reduction in tariff review application to N250,000

The Nigerian Electricity Regulatory Commission, NERC, on Wednesday moved to exercise one of its cardinal mandates to protect consumers against exploitation through frivolous requests for tariff reviews by power generation companies, GENCOs.

The commission put in place two regulations that spell out the procedures through which such requests could be made and the conditions for investments in electricity networks in the country.

The Chairman of NERC, Sam Amadi, said the regulations were critical to dissuade new investors in the power sector from making requests for tariff reviews based on issues they would not be able to defend or justify.

The first of the two laws, which provide detailed procedures to be followed in conducting tariff reviews in line with the Electric Power Sector Reform Act and the methodology in the multi-year tariff order, MYTO, stipulates the responsibilities of the GENCOs, timelines, costs and request for submission requirements.

One of the major requirements of the regulation stipulates the applicant to pay a non-refundable filing fee of N2million, subject to periodic reviews by the Commission.

The other regulation is aimed at providing incentives to encourage the Transmission Company of Nigeria, TCN, and the power distribution companies, DISCOs, to make appropriate and sustainable investments in capacity expansion.

At the consultative meeting on the new draft regulations held in Abuja on Wednesday, stakeholders called for a drastic reduction in the fees to avoid it impacting their bottom-line.

A representative of the Abuja Electricity Distribution Company, Abuja DISCO, Bola Odubiyi, asked the Commission to bring down the N2 million application filing fee for extra-ordinary tariff review to about N250,000, since its core mandate was not revenue generation.

Describing the fees as totally unreasonable, Mr. Odubiyi said it was NERC’s legitimate responsibility to entertain such requests, adding that the GENCOs were already remitting funds to the Commission on a monthly basis.

“We find the application fee of N2million to NERC as totally unreasonable. We are already paying NERC every month. Asking us (operators) to pay N2 million for what is a legitimate request is totally unacceptable. NERC is not a profit making organization, which is supposed to cover its cost only, not to profit.” Mr. Odubiyi said.

He warned the Commission on the dangers of entertaining separate applications from different companies at different times, stressing that it would lead to staggered tariff under the MYTO.

Describing the information used by NERC in computing its minor tariff review as almost historical, as they do not reflect current economic realities, Mr. Odubiyi urged the Commission to base its decision on the forecast of the Central Bank of Nigeria, CBN, and that of the National Bureau of Statistics, NBS, for it to be realistic.

Mr. Amadi, in his response, said the Commission was concerned about those operators who want to base their request for tariff review on their profit making motives, without a commitment to expand and deliver quality services.

He said operators should trust the Commission that it was in the best interest of all stakeholders for them to look at the process for the review of tariff, which included getting consumers groups to verify the issues factored into the requests.

These issues, he said, should be backed up with verifiable facts, adding that every investment must be accounted for, while those who make investments that would be recovered.

“There must be a process whereby they would verify and agree to allow the operator make investment as well as a way to compensate for the investment,” Mr. Amadi said. “The industry is a guaranteed market that is certainly not manipulated every day. It is based on rule of law, due process so that investors will continue to make investments.”

The NERC Chairman said the most important issue facing the industry was that of gas supply at the most commercially viable price, saying this has hindered the country from realizing its target of 6,000 megawatts, MW of electricity as originally envisaged.

“The increase in gas price would make gas more available for power generation. If one listened to the Minister of Petroleum Resources, she was very clear that NERC is demanding for the same commitment on more quantity. What that means is that we can now grow more capacity. With that the average cost will be lower, and consumers will have a better deal,” he said.

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